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Back-end Load

A sales charge, also known as a "deferred sales charge," investors pay when they redeem (sell) mutual fund shares. Funds generally use these to compensate brokers.

Banking Regulators

The SEC routinely receives questions and complaints from investors about the investment products they have purchased. But not all investments are considered securities under the securities laws. For example, some products, such as notes that have been issued by a bank, may not be securities and are regulated by the banking authorities.


Filing for protection under the federal bankruptcy laws can help companies make plans to repay their debts.  A bankrupt company might use Chapter 11 of the Bankruptcy Code to reorganize its business and try to become profitable again.  During the period of the bankruptcy proceeding, management may continue to run the day-to-day business operations but significant business decisions generally must be approved by a bankruptcy court.  While a company that emerges from Chapter 11 bankruptcy protection may resume some or all of its former operations, it may do so with a new group of investors.

Bankruptcy for a Public Company

A company may decide to declare bankruptcy when it suffers from crippling debt.  Federal bankruptcy laws govern how the assets and business of a company will be used to clear its debts.

There are two types of bankruptcy available to companies (Chapter 7 and Chapter 11), but regardless of the type of bankruptcy a company files under, any common stock in a bankrupt company is likely to be worthless.  That is because the common stock (that is, “equity”) is the last in line to receive what’s available to be distributed in a bankruptcy proceeding. 

Basis Point

One one-hundredth (.01) of a percentage point. For example, eight percent is equal to 800 basis points.

Bear Market

A time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period.

Beneficial Owner

A beneficial owner holds stocks indirectly, for example, through a bank or broker-dealer. Beneficial owners are sometimes said to be holding shares in "street name."

Bid Price

The term "bid" refers to the highest price a buyer will pay to buy a specified number of shares of a stock at any given time.  The term ask refers to the lowest price at which a seller will sell the stock.

The bid price will almost always be lower than the ask or “offer,” price.  The difference between the bid price and the ask price is called the "spread."

Binary options

A binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a particular asset will rise above or fall below a specified amount.   Once the option is acquired, there is no further decision for the holder to make regarding the exercise of the binary option because binary options exercise automatically.  Unlike other types of options, a binary option does not give the holder the right to buy or sell the specified asset.  When the binary option expires, the option holder receives either

Blank Check Company

A blank check company is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person. These companies typically involve speculative investments and often fall within the SEC’s definition of "penny stocks" or are considered "microcap stocks."

Blue Sky Laws

In addition to the federal securities laws, every state has its own set of securities laws—commonly referred to as "Blue Sky Laws"—that are designed to protect investors against fraudulent sales practices and activities. While these laws do vary from state to state, most state laws typically require companies making offerings of securities to register their offerings before they can be sold in a particular state, unless a specific state exemption is available. The laws also license brokerage firms, their brokers, and investment adviser representatives.

Board of Directors

A group of people elected by shareholders to oversee the management of a corporation.

Boiler Room Schemes

Boiler room schemes are large-scale operations designed to lure in as many investors to an investment scam as possible, often using high-pressure sales tactics.   Boiler room scheme operators may cold call investors or solicit investors through emails, text messages, social media, and other means.  Beware of boiler room scheme tactics, including:

Bond Swap

The investor sells one bond and uses the proceeds to buy another bond, often at the same price.


A bond is a debt security, similar to an IOU.  Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time.

When you buy a bond, you are lending to the issuer, which may be a government, municipality, or corporation.  In return, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal, also known as face value or par value of the bond, when it “matures,” or comes due after a set period of time. 

Bonds, Corporate

Corporate bonds are bonds issued by companies. Companies issue corporate bonds to raise money for a variety of purposes, such as building a new plant, purchasing equipment, or growing the business.

Bonds, Selling Before Maturity

Investors who hold a bond to maturity (when it becomes due) get back the face value or "par value" of the bond. But investors who sell a bond before it matures may get a far different amount. For example, if interest rates have risen since the bond was purchased, the bondholder may have to sell at a discount—below par. But if interest rates have fallen, the bondholder may be able to sell at a premium above par.

Bonus Credits for Annuities

In an attempt to attract purchasers, some insurance companies offer variable annuity contracts with "bonus credits." A bonus credit is the extra amount an insurance company agrees to add to the value of your contract-usually a specified percentage (typically ranging from 1% to 5%) of the payments you make during a certain time period. While bonus credits sound like free money, variable annuities with bonus credits may have higher expenses that offset any gain.

Breakpoint Discounts

Some mutual funds that charge front-end sales loads will charge lower sales loads for larger investments. For example, a fund might charge a 5% front-end sales load for investments up to $25,000, but reduce that to a 4% load for investments between $25,000 and $50,000 and 3% for investments exceeding $50,000. The investment levels required to obtain a reduced sales load  are commonly referred to as "breakpoints."


An individual who acts as an intermediary between a buyer and seller, usually charging a commission to execute trades. Brokers are required to seek the best execution of trades they make for clients, and if they recommend investments to clients, those investments must be suitable for the client.

Broker Vote

For certain routine matters to be voted upon at shareholder meetings, if you don’t vote by proxy or at the meeting in person, brokers may vote on your behalf at their discretion. These votes may also be called uninstructed or discretionary broker votes. There are stock exchange rules regarding which routine matters brokers may vote upon.

Broker-Dealers: Why They Ask for Personal Information

Brokers generally request personal information from their customers, including financial and tax identification information, to comply with U.S. government laws and rules, as well as rules imposed by self-regulatory organizations (SROs).  Brokers request personal information from new customers as well as from customers who have had long-standing relationships with their firms.

Here are some of the reasons why brokers need to gather this information:


Brokerage Account – Closing Your Brokerage Account

Generally, either you or your brokerage firm may close your brokerage account at any time.  The specific steps you will need to follow to close your account are usually found in the terms and conditions of your brokerage account agreement.  In addition, these terms and conditions generally specify when and how your brokerage firm may close your brokerage account at its own discretion.  If you have any questions regarding the terms and conditions in your brokerage agreement, please contact your brokerage firm.  

Bull Market

A time when stock prices are rising and market sentiment is optimistic. Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period.

Buying Long

Purchasing or owning shares of stock, with the expectation that the stock will rise in value.